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Budget to hit local PC manufacturing: MAIT

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CIOL Bureau
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BANGALORE, INDIA: While the Union Budget 2011 was by and large welcomed by the industry, a few details show that it failed to look at some of the pain points of IT manufacturers, especially the problem of inverted duties, double taxation on software, etc.

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Manufacturers' Association of Information Technology (MAIT) came up with a few findings and recommended that that the announcements have inadvertently exposed Indian IT manufacturing to inverted duties that will discourage manufacturing.

Ashwini K Aggarwal, executive director, MAIT, said, “As per the Union Budget for 2011, the electronics industry will continue to pay for the Special Additional Duty (SAD). This duty promotes imports and gives a tough fight to the local manufacturers. I believe that the annual savings by importing would be equal to the investments in running the manufacturing unit.”

He added that according to one of the conditions raised by the government, local manufacturer could claim for refund of the SAD money, if they achieve 44 per cent value addition in their business, but achieving that 44 per cent becomes more difficult.

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With the new budget, (following Annexure 1B duty) importing a PC (with Core-i3 / g41/2gb/500 GB HDD/18.5"TFT) would save around Rs 602 per PC, he added.

“On behalf of the industry, we have submitted alerts to the Ministry and they are looking into the matter. We have raised three major concerns and respective recommendation,” said Aggarwal.

Abolish Special Additional Duty for PC manufacturers

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First, SAD should be abolished for PC manufacturers and five per cent (countervailing duty) CVD should be proposed on microprocessors, flash memory, RAM, and hard drives/combo drives.

Secondly, MAIT recommends a clarification confirming the classification of information technology / computer software as documents of title conveying the right to use information technology software under CTH 4907.00.30. This will ensure that the exemption under notification no.21/2002 (Sr. No.157) dated March 1, 2002 can be availed at the time of clearance and import through Customs and Service Tax paid on reverse charge basis at the time of remittance to the Suppliers with Service Tax being charged on local sale.

Excise Duty reduction should benefit all printers

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Thirdly, there should be a clarification on extending the benefits to all printers and not only the laser and inket printers.

Agreed N.Sambamoorthy, senior general manager, Sales & Marketing, Epson India.

“In printer category, the budget had reduced the Excise Duty/ CVD to five per cent and removed the SAD to nil on parts of inkjet and laser-jet printers imported by actual users for manufacture of printers. This benefit should have been taken for all the printers and not only a few. Local manufactures, especially the dot matrix, line printers, thermal printers and many more would face a major set back.”

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Epson is among those companies which have received a green signal from their headquarters to open up a local manufacturing hub, but the local management is yet to find any good reason for it.

Sambamoorthy added, “We have got budgets, and sanctions for opening up a local unit, but we do not find any substantial cost savings.”

CEO and managing director of WeP Peripherals (one of largest producers of printers in the country), Ram N Agarwal, opined that the budget announcement could have had lobbying influences. He said, “Looking at the printer and imaging market in the country, and according to reports, HP enjoys majority share in the market followed by Cannon.”

There has been talks within the industry that owing to huge investments, a few product majors might look at consolidation of their manufacturing units followed by the complete closure of the units.

While companies seem to carry to different opinion. “We opened a local manufacturing unit to stay close to the market/ customer and respond faster to its needs. And companies operating in the SEZ/STPI zones get substantial subsidies to operate locally,” said a spokesperson from Dell, which has a manufacturing unit in Chennai.

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